Hyperlawhypertext legal database Doolittle v. Naylor 15 N.Y. Super. Ct. 206

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Doolittle v. Naylor

15 N.Y. Super. Ct. 206 2 Bosw. 206 Court N.Y. Super. Ct. Decision date 1857-12-06 English

Contents

Majority

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Henry Doolittle, Respondent v. Joseph Naylor and Peter Naylor, Appellants.

Headnote

When a purchaser of personal property, subject, at the time, to two mortgages which are valid liens thereon, promises one of the mortgagees, verbally, to pay to him a debt owing to him by a third person, which is secured by one of such mortgages, no action will lie on such promise, though founded on a good consideration.
Such a promise, is a promise to be answerable for the debt of a third person, which such third person continues liable to pay, and is void by the statute of frauds, unless in writing, and unless such writing expresses the consideration of it.
If such promise, instead of being made to such mortgagee, is made to a third person who is not liable for the payment of such debt, no action will lie upon it at the suit of such mortgagee.
But when, in order to become such purchaser, and retain the use of the property, and to dissuade the holder of the second mortgage from enforcing his mortgage by foreclosure, etc., and to induce the holder of the first mortgage to assign it to his friend, such purchaser promises the second mortgagee that he will pay the first mortgage, and will also, by a day named, pay the second mortgage, if a sum agreed on be deducted therefrom, and the second mortgagee agrees to the deduction, and agrees to forbear, and, in reliance on the promise, does forbear enforcing his mortgage to the day named; and upon procuring such agreement, such purchaser, with the assent of the second mortgagee, induced by such promises, prevails upon the holder of the first mortgage—also induced by the promise that the second mortgage shall be paid—to assign the same to a third person, who advances the amount thereof—
And thereafter a sale is made, under the first mortgage, at the instance of such purchaser, and he again becomes the purchaser at the sale, and repays the advance
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bo made, the first mortgage will, as between such purchaser and such second mortgagee, be deemed paid and extinguished, and the second mortgage be regarded as the first lien upon the property, although, as between such purchaser and subsequent incumbrancers, the first mortgage may still be treated as valid, and subsisting at the time of the sale so made under it.
Under such circumstances, the first mortgage will be treated as paid and extinguished, when that course is required to subserve best the purposes of justice. It will not be treated as subsisting and valid, except to subserve an innocent purpose injurious to no one.
And when, on established facts, such first mortgage, as between a purchaser at a sale under it and such second mortgagee, will be deemed satisfied and extinguished, a mortgagee of the same property, under a mortgage executed by such purchaser, will acquire no rights superior, in equity, to those of said second mortgagee. On the contrary, the lien of the latter will be preferred, in equity, to his.
(Before Bosworth and Woodruff, J. J.)
Argued, June 12;
decided, December 6,1857.
This action comes before the Court, upon appeals taken by the defendants, Joseph Naylor and Peter Naylor, separately, from the judgment which was rendered on a trial of the action before Hoffman, J., without a jury. It was commenced about the 27th of July, 1855, and brought to trial in Febuary, 1856. It was brought by Henry Doolittle, as plaintiff, against Joseph Naylor, Abraham W. Grallier, Charles A. Coe, Henry Bradley, William H. Burroughs and Peter Naylor, as defendants. The defendants, Joseph Naylor, Charles A. Coe and Peter Naylor, severally, answered the complaint. The defendant, Grallier, though served with the summons, did not answer. The defendants, Bradley and Burroughs, were not served with the summons, and did not appear in the action.
Any statement of the pleadings is deemed unnecessary, beyond such notice as is taken of them in the opinion of the Court.
This action was brought by the plaintiff, as holder of a second chattel mortgage upon furniture, etc., in the hotel known as the Irving House, to have a sale made upon a prior chattel mortgage set aside as fraudulent, so far as the same might be claimed to foreclose the plaintiff’s rights in the property, to have said prior mortgage declared extinguished by reason of certain payments, made, colorably, by third parties, but in fact, (as the plaintiff claimed,) by the defendant, Joseph Naylor, the person equitably bound to pay the same, and to charge said Joseph Naylor, per
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sonally, with, the payment of the amount due on the plaintiff’s said second mortgage, as having, on purchasing the mortgaged property, assumed said mortgage. The judgment of the Special Term granted the relief so claimed, and it is from this judgment that the defendants, Joseph Naylor and Peter Naylor, have, severally, appealed.
Daniel D. Howard, the former lessee and conductor of the Irving House, sold out the unexpired term to the plaintiff, (Doolittle,) and William H. Burroughs, on the 27th September, 1852, and they, to secure the consideration money of such sale, and the future rents, executed the chattel mortgage, which, at the time of the transactions in question, was the first lien upon the property.
The plaintiff and Burroughs, as Doolittle & Burroughs, went into the possession of the hotel, which they carried on until Sept. 22, 1853, when plaintiff sold out all his interest in said hotel to Henry Bradley, and said Bradley, with Burroughs, joined in executing to plaintiff a mortgage on the furniture, to secure the consideration money, which was represented by certain promissory notes. This mortgage is the mortgage under which the plaintiff claims herein, being the second lien on said furniture, the How•ard lien being the first.
Bradley & Burroughs carried on said hotel, paying the amounts becoming due on said two mortgages, until Sept. 18, 1854, when they failed, and made an assignment to George Taylor.
George Taylor, as assignee, carried on the hotel for a while, but on the 10th of February, 1855, made a sale, at auction, of all the right, title and interest, of said Bradley & Burroughs, and of him, the said Taylor, as assignee, to the lease of the Irving House, and to the furniture and fixtures therein, and the defendant, Gallier, became the purchaser. He at once, however, assigned his purchase, except the lease, to the defendant, Joseph Naylor.
/So far as the facts have been stated, they were undisputed. As to other matters of fact, involved in the issues made by the pleadings, the Court found, (including the conclusions of law,) as follows, viz.:—
“ That by the terms of the sale, made by George Taylor, as assignee, on the 10 th of February, 1855, mentioned in the complaint, the property was sold expressly subject to all incumbrances, and among them were specified at such sale the mortgages: 1st. To
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Daniel D. Howard, for rent due and to become due at the rate of $2,604.16 monthly, $6,256.97 being stated to be the rent due on the first of February, 1855. 2d. To Henry Doolittle, the plaintiff, for about $12,500 and interest; and 3d. To the Central Bank, for various amounts, then estimated at $30,000. And the property was sold, subject to whatever might be due on the said mortgages.
“ That the purchase made, at such sale, though in the name of the defendant Gallier, was, in fact, the purchase of the defendant Joseph Naylor, who immediately thereafter went into the possession of the Irving House, and occupied the same during the residue of the term which had been granted by said Howard to the plaintiff and William H. Burroughs.
“ That prior to and in view of the said sale by said Taylor, the defendant Joseph Naylor had, in consideration of their forbearing payment of their mortgages, verbally agreed with said Howard, and with the plaintiff, that, if the said Naylor purchased at such sale, he would assume and pay to said Howard the rent due and to become due to him, in pursuance of the terms of his said mortgage ; and had also verbally agreed with the plaintiff to assume and pay the amount of plaintiff’s mortgage, upon his deducting the sum of $1500 from what was then due upon it, which plaintiff agreed to do. That, in March, 1855, the rent to Howard being in arrear, and he taking measures to collect it, the defendant Joseph Naylor made an arrangement with the defendant Coe, by which the latter was to advance the amount of Howard’s mortgage, upon consideration of a purchase of cigars, by Naylor—Naylor to have the mortgage assigned by Howard to Coe, and to make good to Coe any deficiency that might arise on a sale of the mortgaged property.
“ That said Naylor negotiated such arrangement with said Howard, and settled its terms; that it was carried out by an instrument, dated 24th March, 1855, by which, in consideration of the sum of $14252.42, agreed to be paid to Howard, he agreed to sign over to Coe the mortgage held by him; that Coe, on the 12th of April, paid the sum of $9255.42, making, with 5000, previously paid by Coe, the whole of said sum so agreed to be paid to said Howard, but no formal assignment was made to Howard by Coe.
“ That, just before this arrangement between Howard and Coe, the defendant, Joseph Naylor, in consideration that plaintiff
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would forbear to enforce Ms mortgage, again verbally promised and undertook to pay the amount of said mortgage, less the deduction of $1500 previously agreed upon, and plaintiff did so forbear.
“ That, upon the conclusion of the transaction between Howard and Coe, the defendant Joseph Naylor took measures to make a sale of the property in the Irving House, under the said Howard mortgage. He employed an auctioneer, and had an inventory made under his direction. . The articles were appraised at $16,755.08, as what they would bring for cash at auction, and were sold on the 3d of May, 1855, under the direction of said Naylor, producing a little over $8000. The sale was made by rooms, and in a way calculated to prevent a fair value being obtained. Said Joseph Naylor purchased the whole, with some inconsiderable exceptions, and then repaid Coe on the 5th of May, $8189.40, and on the 7th of May, $6064.94, being the amount of Coe’s advance and interest, both these sums coming from Naylor.
“ That the conduct of said Joseph Naylor, in effecting the said arrangement, between said Howard and Coe, and in the sale and other proceedings, under said Howard mortgage, was fraudulent against the plaintiff and a breach of faith towards him, and amounted, virtually, -to a payment by said Naylor, out of his own funds, of the Howard mortgage, which was thus satisfied and extinguished.
“ That said Joseph Naylor has never paid any part of the amount due to the plaintiff, upon his said mortgage, and plaintiff is still the owner and holder thereof, and of the note of $11,654.37, which, with interest from the 22d September, 1853, became and fell due on the 4th January, 1855, and still remains unpaid, and was the amount for which said Naylor then remained a security.
“ That, on or about the 2d day of June, 1855, the defendant Joseph Naylor executed and delivered to the defendant Peter Naylor a chattel mortgage, bearing that date, to secure the payment of a promissory note, bearing the same date, made by said Joseph Naylor to said Peter Naylor, for the sum of $10,000, payable on demand, of and upon the furniture and fixtures in the said Irving House, embracing the furniture and fixtures so purchased by said. Naylor at the sale of the 3d May, 1855, under said Howard’s mortgage, which said mortgage to said Peter Naylor
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was duly filed in the Register’s Office of the City and County of New York, on the 22d June, 1855..
“ That, of the said sum of $10,000, which the said mortgage to Peter Naylor purported to secure, the sum of. $6688.13 was for cash and notes loaned and advanced, by said Peter Naylor, to and-for the said Joseph Naylor, upon the faith of said mortgage, but the residue, to wit, $3311.87, was a former debt, arising out of notes, or endorsements, previously made by said Peter Naylor for said Joseph Naylor.
“ That, said Peter Naylor does not appear to have had any notice, at the" time of receiving said mortgage, of the hen or claim of the plaintiff upon the mortgaged property.
“ I therefore find and decide, that the plaintiff’s mortgage, notwithstanding the sale of the 3d -May, 1855, under the mortgage given to Daniel D. Howard, remained, after that sale, a valid and subsisting security, as against the defendant Joseph Naylor, for the amount remaining due thereon, less the sum of $1500, with interest from February 10th, 1855, agreed to be deducted therefrom as aforesaid, upon all the property embraced in said mortgage, and after the repayment, by the said Joseph Naylor to Charles A. Coe, of the amounts advanced by said Coe to Daniel D. Howard, was the prior hen and incumbrance on said property, subject to the deduction therefrom of the sum aforesaid.
“ That the defendant Joseph Naylor is personally liable for the amount due on said mortgage, deducting the sum of fifteen hundred dollars and interest from the 10th day of February, 1855, and that plaintiff is entitled to judgment against him accordingly.
“ That the mortgage, to the defendant Peter Naylor, is not entitled to a preference over the said mortgage of the plaintiff, but is a subsequent hen, or incumbrance, and is subject thereto.
“ And it appearing that the said mortgaged property has been sold, under a stipulation between the parties, and the proceeds received by the defendant Peter Naylor, the plaintiff is entitled to judgment, that the defendant Peter Naylor pay to said plaintiff, out of the proceeds of said sale, his costs herein, against the defendants, and the amount of his said mortgage debt—to wit, the sum of $11,654.37, with interest from the 22d day of September, 1853, deducting the sum of $1500, with interest thereon from the 1 10th of February, 1855—and that the defendant Joseph Naylor
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pay to the plaintiff any deficiency there may be, after applying such proceeds.”
The judgment rendered thereupon, exclusive of its recitals, is as follows, viz.:—
“It is hereby adjudged, in accordance with the decision of said Justice, that, at the sale of the property in the Irving House, made on the 10th February, 1855, by George Taylor, assignee, as stated in the complaint, said property was sold expressly subject, among other liens and incumbrances, to the mortgage of the plaintiff, described in the complaint; that the purchase, made at such sale, though in the name of the defendant Gallier, was, in fact, thé purchase of the defendant Joseph Naylor, who immediately went into possession of the Irving House, and occupied the same during the residue of the term, which had been granted to the plaintiff and William H. Burroughs.
“ That defendant personally assumed the payment of the amount due plaintiff, on his said mortgage, on the said 10th day of February, 1855, less a deduction of $1500, which plaintiff agreed to make, and is liable therefor.
“ That the conduct of the defendant Joseph Naylor, in effecting the arrangement for the purchase, by the defendant Coe, of the mortgage held by Daniel D. Howard, mentioned in the complaint,
' and the salé of mortgaged property made on the 3d day of May, 1855, under the said mortgage, was fraudulent, and the said sale void as against the plaintiff, and did not discharge the lien of his mortgage upon the said property, as against the defendant Joseph Naylor.
“ That the defendant .Joseph Naylor, shortly after said sale, repaid to said Coe the moneys paid by him to said Howard, on account of said mortgage of said Howard, which was thereby discharged and extinguished, and plaintiff’s mortgage remained the prior lien and incumbrance on the property.
“ That no part of the said mortgage debt of plaintiff has been paid, but the same is still due and unpaid to the plaintiff, who is the owner and holder thereof, and it is hereby adjudged, that plaintiff recover the sum secured by said mortgage, with the deduction aforesaid, .-against the defendant Joseph Naylor, amounting, with interest, at the date hereof, to the sum of twelve thousand two hundred and twenty-eight dollars and seventy-two cents.
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“ That the mortgage to the defendant Peter Naylor, mentioned in his answer herein, is not entitled to a preference over the said mortgage of the plaintiff, but it is a subsequent lien and incumbrance, and subject thereto.
“ And it appearing, from the stipulations herein, that the mortgaged property has been sold, and the proceeds received by the defendant Peter Naylor, it is further ordered and adjudged that said defendant Peter Naylor, out of said proceeds, pay to the plaintiff, or his attorneys, the sum of $872.07, adjudged to the plaintiff for his costs and charges in this action, with interest from the date hereof, and also the sum of $12,228.72, so adjudged as aforesaid, against the defendant Joseph Naylor, with interest from the date hereof, and that in case the said proceeds be insufficient to pay the said amounts and interest, the said defendant, Peter Naylor report to this Court the proceeds so received by him, and his disposition thereof, specifying the amount of such deficiency, and that the defendant Joseph Naylor pay the same to plaintiff.”
Judgment was entered on the 22d of April, 1856. The stipulations, referred to in the judgment, formed part of the case, and, exclusive of the title of this action, read thus, viz.:—
“ The plaintiff hereby stipulates not to interfere with, or obstruct, by enforcing the injunction herein, or otherwise, the sale of the furniture and other personal property in the Irving House, embraced in the mortgage to the plaintiff in the complaint mentioned, now advertised, under the direction of the defendant Peter Naylor, by Henry H. Leeds & Co., auctioneers; and said defendant Peter Naylor, in consideration thereof, hereby stipulates and agrees with the plaintiff, as follows:
“That the net proceeds of said sale, deducting the auctioneers’ fees and charges, shall be considered a fund in Court, subject to the judgment that may be entered in this action, to the same extent that the property itself would be, if not sold; that the amount of said net proceeds, over and above the sum which the mortgage from Joseph Naylor to Peter Naylor, mentioned in the answer of said Peter Naylor herein, purports to secure, shall be forthwith deposited in the New York Life Insurance and Trust Company, to abide the judgment of this Court; and that the amount of said proceeds, received by the said Peter Naylor, under
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said mortgage, he will retain, subject to the judgment of this Court; and that he will file satisfactory security, by bond, with one surety, to pay over, or deposit the same, as may be adjudged by said Court, unless he appeal from such judgment, and give security to stay the execution thereof, according to law.
“ And the said Peter Naylor stipulates and agrees that the total net proceeds of said sale, less auctioneers’ fees and charges as aforesaid, shall be paid over by the auctioneers to him, the said Peter Naylor, and be by him deposited or held as aforesaid, and that no part thereof shall be paid to the said Joseph Naylor, and nothing herein contained is to be considered as waiving the right of the plaintiff to treat as a violation of the injunction in this action any interference by the defendant, Joseph Naylor, with the said property or proceeds thereof.
“ This stipulation not to apply to the sale of the property in said Irving House, not embraced in the plaintiff's mortgage, or the proceeds thereof, nor to bind the said Peter Naylor to proceed with the sale of any property which he shall not consider to be correct, covered by his mortgage. Petek Naylob.
“New York, February 25, 1856.
“Speib & Nash, PIff’s Aliys.”
SECOND STIPULATION.
“ An auction sale having been made, by H. H. Leeds & Co., auctioneers, of the furniture and other personal property contained in the Irving House, which sale Joseph Naylor claims embraces, besides the property referred to in and covered by the foregoing stipulation, other property of Joseph Naylor, not covered by the plaintiff’s mortgage, but without specific separation of the property sold by direction of Peter Naylor, in accordance with such stipulation, from the other property so sold by direction of Joseph Naylor, and there having been as yet no ascertainment of the respective proportions of the proceeds of sale, which arise from such sources respectively, and the said Joseph Naylor having directed the said auctioneers to pay over his proportion, if any of such proceeds to said Peter Naylor, it is agreed that the whole amount received by Peter Naylor, as net proceeds of the sales aforesaid, as well by virtue of such order or direction of Joseph Naylor as otherwise, shall, after first reserving thereout the amount of said
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Peter Naylor’s mortgage, as mentioned in said stipulation, be deposited by said Peter Naylor in the New York Life Insurance and Trust Company, there" to remain until it shall be ascertained in this suit, or by some other proceeding to which the plaintiff shall be a party, what proportion thereof arises from the sale of the property embraced in the plaintiff’s mortgage, which portion only shall be subject to the provisions of the foregoing stipular tion. It being understood, that although no portion of the fund, so deposited, is to be actually withdrawn, until judicial ascertainment of the respective proportions thereof as aforesaid, except in case of a determination in this suit, to the effect that the plaintiff has no lien thereon, yet nothing herein contained, nor the said Joseph Naylor’s permitting the whole proceeds to be deposited as aforesaid, shall prevent the said Joseph Naylor from making, in the mean time, any lawful transfer or disposition of his interest in the fund, so remaining on deposit, subject to such rights as the plaintiff may have (if any) by reason of the pending of this action, and of the matters involved therein.
“ Nothing herein contained is to be considered as waiving the injunction order herein, except so far as to sanction the auctioneers’ sale, the plaintiff claiming to enforce said injunction against any act of the defendant Joseph Naylor, in respect to the proceeds of such sale, in fraud of the plaintiff’s rights in this action.
“ Peter Naylor.
“Dated, March 8, 1856. Speir & Nash, Plff’s Aliys.”
The defendants, who appealed, duly filed exceptions to the decision.
On the trial, Joseph Naylor objected to the admission of any evidence tending to prove a parol agreement, by him, to assume the debt, owing by Bradley and Burroughs to the plaintiff. The objection was overruled, and such evidence received, and he excepted to the decision.
So much of the evidence given, as is necessary to be stated, will be found in the opinion of the Court.
Wm. M. Evarts, for the appellants, made and argued the following points:—
I. The evidence does not prove any verbal agreement by Jo
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seph. Naylor to pay, either the debt to Howard, or the debt to the plaintiff. There is no proof of any verbal agreement, by Joseph Naylor, to assume Bradley’s debt to the plaintiff, prior to the purchase, by Joseph Naylor, from the assignee of Bradley & Burroughs, February 10, 1855.
II. Such a verbal promise, if proved, and upon a valid consideration proved, being for the payment of an existing debt of another, would be wholly void under the Statute of Frauds, for want of a writing. Bradley remained always bound to the plaintiff for the debt, and the mortgaged property, also, was bound to him. So, for any payment, on account of the debt assumed, beyond the proceeds, or value, of the mortgaged property, Bradley would have been liable to Joseph Naylor, unless for the reason that such payment might be held voluntary.
HI. The foreclosure of the prior mortgage, to Howard, was valid and Bona fide, and the sale vested in Joseph Naylor a title, clear of the second mortgage, whether Joseph Naylor was personally liable for the second mortgage debt or not.
IY. If the foreclosure sale was not regular and valid, then the mortgage was not satisfied thereby, and it is now to be first paid from the proceeds of the mortgaged property.
Y. In either alternative, the new mortgage to Peter Naylor, in good faith and without notice, is a better lien than the plaintiff’s. To give the plaintiff’s mortgage a better place, upon the mortgaged property, than belonged to it, by its own contract, at the expense of Peter Naylor’s lien, which is supported upon the title made through the prior mortgage to Howard, is grossly inequitable.
YI. But, supposing that the foreclosure sale, under Howard’s mortgage, is open to impeachment, in equity, as against the plaintiff, yet such latent equity cannot override the lien acquired bona fide, without notice, and for value, by Peter Naylor, while the legal title and possession, made and delivered under such foreclosure sale, was in Joseph Naylor, his mortgagor. Peter Naylor’s equities are perfect, and he has the legal title besides.
S. P. Nash, for the plaintiff.
I. The findings of fact, by the Judge at Special Term, are all
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fully warranted by the evidence; and they will not, therefore, be disturbed on appeal.
H. Joseph Naylor himself was the party equitably bound to pay the greater portion of the debt due, on the Howard mortgage, on the 1st of May, 1855, irrespective of his having assumed the payment of that mortgage. The mortgage was to secure the rent of the premises, and Naylor had the use of them from the 10th of February. The whole sum paid Howard was $14,254.42, all of which, except $6,256.97, accrued during Joseph Naylor’s tenancy.
HI. Joseph Naylor’s agreement with the plaintiff to assume and pay the Howard mortgage, and also to assume and pay plaintiff’s mortgage, was a valid agreement. It was founded on a valuable consideration, namely, plaintiff’s agreement to forbear and to remit $1500 of his claim. It was made just before Naylor became the purchaser of the property, and was explicitly renewed and affirmed after he had purchased and become the owner of the property on which the mortgages were liens. (2 Kent’s Comm. 465; Seaman v. Seaman, 12 Wend. 381 ; Elting v. Vanderlyn, 4 Johns. 237 ; Mapes v. Sydney, Cro. Jac. 683; Charter v. Stevens, 3 Denio, 33 .)
IV. Joseph Naylor’s agreement to pay plaintiff’s mortgage, less $1500, was not only founded on a valuable consideration, but was not within the Statute of Frauds, and was therefore valid, though not in writing. The statute, avoiding promises not in writing “ to answer for the debt, default or miscarriage of another person,” (2 R. S. 136, § 2, sub. 2,) does not apply to the case where the party promising receives property wherewith to pay the debt he assumes, and becomes, as between himself and the original debtor, the principal debtor, and bound to pay the debt as his own, the original debtor standing to him in the relation of a surety. (Kingsley v. Balcome, 4 Barb. 131 ; Mercein v. Andrus, 10 Wend. 461 ; Murray v. Smith, 1 Duer, 412 ; Lippincot v. Ashfield, 4 Sandf. S. C. Rep. 611; Wyman v. Smith, 2 Id. 331; Blyer v. Munholland, 2 Sandf. Ch. 478 ; Barker v. Bucklin, 2 Denio, 45 ; Nelson v. Boynton, 3 Metc. 396 ; Trotter v. Hughes, 2 Kern. 74.) That is this case. Naylor bought this property, a balance of the purchase money being still unpaid, subject to the mortgage which secured that balance, and assumed, personally, to pay the mortgage. He thus became the principal debtor, and, as
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to him, Bradley and Burroughs, the original promisors, stood in the place of sureties. (Trotter v. Hughes, 2 Kern. 74, 79.)
V. The re-payment to Coe, by Joseph Naylor, of the amount advanced by him to take up the Howard mortgage, extinguished it. While Coe remained unpaid, it may have continued valid in his hands for his security; but, when Joseph Naylor repaid his advance, the hen of the mortgage was gone. Joseph Naylor so considered it, when he mortgaged the same property to Peter Naylor, within a month afterwards. Wherever the money, which goes to pay off a mortgage, comes, in fact, no matter through what covered and tortuous channels, from the owner of the equity of redemption, it discharges the lien; and this is found by the decision to be the fact in this case.
VI. But it is contended, that before the mortgage was extinguished, plaintiff’s rights were also destroyed by the sale of the 3d May. This would be so, had that been, in reality, a proceeding, on the part of Coe, to collect his money, fairly and honestly conducted; but the decision finds it to have been, in fact, a proceeding on the part of Joseph Naylor, the owner of the equity of redemption, who had personally assumed the payment of the mortgage he was attempting to cut off, and that it was fraudulently and dishonestly conducted. It therefore left plaintiff’s mortgage an unforeclosed lien, so far as Peter Naylor was concerned. (See Jencks v. Alexander, ' 11 Paige, 619.)
VH. After this pretended foreclosure, and the repayment to Coe of his claims, under the Howard mortgage, that mortgage being extinguished, and plaintiff’s mortgage not foreclosed, Joseph Naylor held the property, subject to plaintiff’s mortgage, and subsequent purchasers, or mortgagees from him, took also, subject to that mortgage. Peter Naylor’s rights are not, therefore, paramount to plaintiff’s.
The purchaser of personal property buys at his own peril, acquires the title of his vendor only, with all its defects, subject to all specific hens upon it, except—first, where the property is negotiable paper, purchased in good faith, for a valuable consideration ; second, where the purchaser buys of a party in possession, upon whom the true owner has voluntarily conferred an apparent right to sell, or entrusted, with such documents as constitute indicia of title. (Saltus v. Everett, 20 Wend. 267 ; Herring v. Wil
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lard, 2 Sandf. S. C. Rep. 419; Wood v. Colvin, 2 Hill, 566 ; Peabody v. Fenton, 3 Barb. Ch. 451 .)
If Peter Naylor had bought, in good faith, at the pretended foreclosure sale, and paid his money, he might have come within the rule, because Coe was ostensibly exercising a valid power of sale, but he claims under Joseph Naylor, to whom that sham sale was no protection.
VHI. But if Peter Naylor’s mortgage is to be considered prior to plaintiff’s, it can only be so considered to the extent of his new advance. His prior debt must be deducted. (Root v. French, 13 Wend. 570 ; Ray v. Birdseye, 5 Denio, 619 .)

At the date and upon the execution of the agreement of the 24th of March,' 1855, between Howard and Coe, independent of the question of the extent to, and the manner in which the rights and liabilities of either of the parties may have been affected by any parol promise of J. Naylor, to pay the mortgage held by Howard, and the mortgage held by the plaintiff, the rights and liabilities of the parties, according to the facts, as found, were as follows:—

Joseph Naylor was the owner of the leases, furniture and fixtures of the Howard House, subject to a mortgage, executed by the plaintiff and Burroughs to Howard, on the 27th of September, 1852. This was the first lien. Such ownership was also subject to a mortgage, covering the same property as the first, and some chattels, in addition, executed by H. Bradley and Burroughs, to the plaintiff, on the 22d of September, 1853. This was a second lien. The other mortgages and liens, to which such ownership was subject, not being material to the decision of any question presented by this appeal, need not be mentioned.

Under the agreement between Howard and Coe, of the 24th of March, 1855, the Howard mortgage was a valid and available security, in the hands of Coe, for the amount of his advances, being $14,254.42.

Although it is not so stated, as a part of the facts found by the Court, yet the testimony is uncontradicted, that the plaintiff assented to the execution, by Howard to Coe, of the agreement of the 24th of March, 1855.

Under such circumstances, Coe had the right, as against the

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plaintiff, to have the mortgaged property sold, and the proceeds applied to pay, first, the amount due to Howard on the mortgage, which he had sold to Coe. Any Bona fide purchaser of the property, at a regular and legal sale of it, under the Howard mortgage, would acquire a valid title to it, as against the plaintiff. Any mortgagee of such property, under a mortgage, executed by such a purchaser, would acquire a specific lien upon it, unaffected by any claim of the plaintiff arising upon the mortgage executed to him, by Bradley and Burroughs.

As against Coe, or any person succeeding to his rights, or as against any bona fide purchaser, at a regular sale, under the Howard mortgage, the plaintiff, inasmuch as he assented to the agreement between Howard and Coe, such assent having been required by Howard, before he would enter into the agreement, is not at liberty to object, that the sum which Coe agreed to pay, and did pay to Howard, for the mortgage, was not owing upon and secured by it.

The Court, at Special Term, found, that “the conduct of J. Naylor, in effecting the arrangement between Howard and Coe, and in the sale and other proceedings under said Howard mortgage, was fraudulent against the plaintiff, and a breach of faith towards him, and amounted virtually to a payment by said Naylor, out of his own funds, of the Howard mortgage, which was thus satisfied and extinguished.”

This finding would seem to have been stated, rather as a conclusion of law, than one of fact. It is not found, as a fact, that these proceedings were designed and prosecuted with an intent to defraud the plaintiff of the lien of his mortgage.

The evidence of Mr. Rodman shows, that he had agreed, as the authorized attorney of the plaintiff, that the property should be sold under the two mortgages, and that it was unnecessary that the furniture should be sold in parcels. It is true, that this agreement was part of an arrangement claimed to have been made between Rodman and J. Naylor, by which the latter was to secure the payment of the mortgage held by the plaintiff, and which, it is claimed, J. Naylor had previously agreed to pay. One of the papers, which was drawn for the purpose of effecting that arrangement, was signed by J. Naylor, and, for aught that is proved or has been found, it may fairly be said, he'expected and believed

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he should induce the other persons to execute them, whose execution of them, or of either of them, would have been satisfactory to the plaintiff.

The fact, therefore, that the furniture was sold in lots, although, under all the circumstances, it may operate as a fraud upon the plaintiff, if held to be an absolute foreclosure of the lien of his mortgage, as between him and the two Naylors, was not deemed by the Court at Special Term, either of itself, or with the other evidence, to justify the conclusion of an actual intent to thereby defraud the plaintiff. At all events, no such conclusion is stated, as a fact found. '

Whether the verbal promise, made by J. Naylor to the plaintiff, and the sale, considering the circumstances under which it was made, and the fact, that J. Naylor was the highest bidder, and the purchaser at such sale, not only extinguished the Howard mortgage, both at law and in equity, as against the plaintiff, but left the mortgage, held by him operative as a valid lien upon the property, and made J. Naylor personally liable to pay to the plaintiff the mortgage held by the latter, are the important questions to be determined. We will, first, consider the question of J. Naylor’s personal liability.

The Court, at Special Term, found, as facts, that prior to, and in view of the sale by Taylor, the defendant Joseph Naylor, in consideration of their forbearing payment of their mortgages, verbally agreed with Howard, and with the plaintiff, that if he purchased at such sale, to assume and pay to Howard the rent due, and to become due, to him, and to the plaintiff the amount due on his mortgage, upon his deducting $1500 from the amount then due upon it, which the plaintiff then agreed to do.

That just before the arrangement between Howard and Coe, of the 24th of March, 1855, J. Naylor, in consideration that the plaintiff would forbear to enforce his mortgage, again verbally promised and undertook to pay the amount of said mortgage, less the deduction of $1500, previously agreed upon, and plaintiff did so forbear.

On these facts the,.. Court concluded, as matter of law, that J. Naylor was personally iiable to pay the plaintiff the amount due on the mortgage held by,the latter, less the sum of $1500, and ordered a judgment in favor-of the plaintiff, against J. Naylor, for

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any deficiency in the proceeds of the mortgaged property to satisfy that much of the mortgage debt.

We have no doubt, that a clear and express agreement of J.

' Naylor, as owner of the property subject to the mortgage, to pay the amount due to the plaintiff, or a part of that amount, in consideration of an equally distinct promise of the plaintiff to forbear generally, coupled with actual forbearance, or to forbear for a definite period, to interfere with the property by a foreclosure of the mortgage, would be a valid contract, unless it is essential to its validity that it should be in writing, and that the writing express such consideration.

The damage to the plaintiff, from delaying to enforce his securities, and by abating a part of his claim, in consequence of such an agreement, or the benefit to Joseph Naylor, from being permitted, in consequence of such an agreement, to retain the possession and use of the property, and make such profitable disposition of it as opportunities might offer, would be a sufficient consideration for such an agreement.

The evidence on this subject is somewhat loose and indeterminate. Mr. Rodman, who negotiated on the part of the- plaintiff with J. Naylor, says, that a short time prior to the sale by Taylor, “I agreed- with him, (J. Naylor,) on Doolittle’s behalf, to defer proceeding upon Doolittle’s chattel mortgage, and he said he would pay Doolittle the amount due on that mortgage, less $1500.”.....“ and he would buy the property at the sale which was then contemplated.”.....“ I told Naylor I wanted some security for his performance of that agreement.”.....“Naylor assured me he would do what he had agreed to do, and he was able to do it." That the plaintiff should be paid, was re-affirmed on the day of the sale.-

When the agreement between Howard and Coe was ready to be executed, Rodman’s assent to it, as agent of Doolittle, was required. J. Naylor assured him, that he would carry out his arrangements with Rodman, and that Doolittle should have his money, or words to that effect. Rodman stated, that he should rely on these assurances, and gave his assent, and advised the plaintiff of it.

Matters remained in this position, as between the plaintiff and J. Naylor, until the 11th of April, on which day another inter

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view took place between J. Naylor and Bodman. From that time there were negotiations between them, for a short period, with a view to put their agreement or understanding in a precise and definite form, or to come to some definite and satisfactory arrangement. The written agreements which were drawn to effect that object, the form and terms of which were assented to, and one of which was executed by J. Naylor, fixed the first of May, 1855, as the day on which the plaintiff should be paid, either in cash, or by endorsed notes.

By each of these two instruments, Doolittle was to sell, and Joseph Naylor was to purchase the note made by Henry Bradley, and the chattel mortgage which the plaintiff held as security for the payment of the note.

The agreement first drawn was not executed by any one. That secondly drawn was executed by Joseph Naylor and John A. Bidwell, but because it was not executed by Mr. Coe, the plaintiff declined to accept it.

The plaintiff had then a suit pending against Joseph Naylor, to restrain him from removing the furniture from the Irving House, and as early as the 17th of April, 1855, had obtained a temporary injunction, and had given notice of moving for a permanent injunction.

That motion was adjourned from day to day, for a few days, while the plaintiff and J. Naylor were negotiating, with a view to come to some definite result, and when the second written agreement was rejected, the plaintiff made his motion for a permanent injunction, and the motion was denied and the injunction dissolved as early as the 30th of April, 1855. That was the end of the negotiation.

The agreement by Naylor, to pay the plaintiff, is stated in the complaint in these words: “ And this plaintiff, on information and belief, avers that it was expressly understood and agreed, between this plaintiff, through his agent, and said Taylor, assignee as aforesaid, and said Naylor and Howard prior to said sale,” (by Taylor,) “ that said Naylor should pay the said $2700 in cash prior to said sale, that he should buy the furniture and fixtures at the sale, and that when he had done, so, he should pay the rent, then in arrear, and to become due, to the said Howard, and pay the amount due to the plaintiff, with a deduction of $1500,

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on or before the first day of May then next; and on these conditions, relying on the said Naylor’s assurances of his intention and ability to do so, the plaintiff assented to said sale and forbore to enforce his said mortgage.”

It is not expressly averred, in this statement of the alleged contract, that Doolittle agreed to forbear, either generally and indefinitely, to enforce his mortgage, or until the first of May then next, or at all.

In construing the finding of the Court in respect to the agreement, in the light furnished by the pleadings and the evidence, we must understand it to be, that, prior to the sale by Taylor as assignee, Joseph Naylor verbally promised the plaintiff, in consideration of “the plaintiff forbearing payment of his mortgage,” and “verbally agreed with the plaintiff,-to assume and pay the amount of plaintiff’s mortgage, upon his deducting the sum of $1500 from what was then due upon it, which plaintiff agreed to do.” The Court does not state, as a fact found, that the plaintiff did agree to forbear. And the subsequently stated fact, that just before the arrangement between Coe and Howard was concluded, Joseph Naylor, in consideration that plaintiff would forbear to enforce his mortgage, again verbally promised and undertook to pay the amount of said mortgage, less the deduction of $1500, previously agreed upon, and plaintiff did so forbear,” imports that the agreement on the part of Naylor was not only verbal, but conditional. He promised to pay if the plaintiff would forbear. How long he must forbear to make it obligatory upon J. Naylor to pay, is not found by the Court nor alleged in the pleadings. That the plaintiff absolutely agreed to forbear, is not directly averred, nor expressly found. But, notwithstanding the want of precision in the language of the complaint, and in that employed to state the facts found by the Court, it may fairly be held, and be understood as intending to mean, that J. Naylor did agree to pay the mortgage held by the plaintiff, less $1500, and the plaintiff agreed to deduct that sum and give forbearance, as to the payment of the residue, and the first of May thereafter was the time to which forbearance was to be extended, and payment made, and that the agreement of the one party, was the consideration of that of the other.

But assuming it to be sufficiently proved and distinctly alleged

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that J. Naylor agreed to pay to the plaintiff the amount of the debt owing to him by Bradley, there is then presented the serious difficulty, that it was an agreement with Doolittle to pay, to him, a debt which Henry Bradley was owing to him.

It was, therefore, an agreement, not in writing, to pay the debt of a third person. It was not an agreement with the debtor, upon the receipt or purchase of something valuable from him, to pay, as its agreed price, to his creditor, the debt owing to the latter by such debtor. Such a transaction would, in equity, have made J. Naylor, as between himself and such debtor, the principal, and such debtor his surety, and such a promise could be enforced by action at the suit of the creditor of such debtor. (Trotter v. Hughes, 2 Kern. 74; Halsey v. Reed, 9 Paige, 446.)

Such a promise, if made, to Taylor, the general assignee, as he was not personally liable to pay the debt to the plaintiff, would confer no rights upon the plaintiff, to resort to Joseph Naylor. (Trotter v. Hughes, supra ; King v. Whitely, 10 Paige, 465.)

But the alleged verbal promise is found, as a fact, to have been made to the plaintiff, the creditor. He still retained the liability of Henry Bradley, his debtor. The promise was to pay a debt owing by Bradley, and to pay it to the plaintiff, to whom Bradley owed it, and the promise was made to the plaintiff, and Bradley was not a party to the transaction.

It was, therefore, a promise .to the plaintiff, to be answerable to him for the debt of Bradley.

If the promise had been cotemporaneous with the creation by Bradley of the debt to the plaintiff, and of the execution of the mortgage, although it might have been made upon a consideration sufficient to uphold it, it would be void, because the promise was not in writing, and in a writing expressing the consideration. (Brewster v. Silence, 4 Seld. 207; Hall v. Farmer, 5 Denio, 484 .)

That the promise was made long after the debt of Bradley was contracted, does not make a stronger case for the plaintiff. The promise is collateral to the principal debt, and payment of that, by the principal debtor, would put an end to all claims, of the plaintiff against Joseph Naylor, based upon such promise.

In Smith v. Ives, ( 15 Wend. 182 ,) it was held, that forbearance to sue was not a new consideration, taking the case out of the statute. (W atson v. Randall, 20 Wend. 201 .)

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It needs no citation of authorities to show, that all collateral promises, for the debt of another, must be in writing, expressing the consideration.

In the present case, it may be said that the consideration consisted, not only of the damage to the plaintiff from forbearing to foreclose the mortgage, but of the benefit resulting to the defendant from the use of the mortgaged property, in the mean time.

However ample may have been the consideration, the difficulty remains, that the contract, or promise, was, to pay the debt of a third person, and was collateral to it; and such promise was not evidenced by a writing subscribed by the defendant, and expressing the consideration. That objection, we think, is fatal to the plaintiff’s right to recover a personal judgment against Joseph Naylor, merely by force of such promise. (Larson & Sanders v. Wyman, 14 Wend. 246 ; Watson v. Randall, supra.)

The remaining question relates to the effect to be given to the purchase made by Joseph Naylor, at the mortgage sale, as between him and the plaintiff, and as between the plaintiff and Peter Naylor.

The Court, at Special Term, found that, prior to the sale by Taylor, the assignee, Joseph Naylor verbally agreed, With said Howard and the plaintiff, that if J. Naylor purchased, at such sale, he would assume, and pay to Howard, the rent due, and to become due, to him, in pursuance of the terms of his mortgage, and also verbally agreed, with the plaintiff, to assume and pay the amount of the plaintiff’s mortgage, upon his deducting the sum of $1500 from its amount, which the plaintiff agreed to do. This promise of J. Naylor was based upon the promise of the plaintiff to so deduct, and also to forbear payment of his mortgage.

We have concluded, as already stated, that these facts, as found, are sufficiently upheld by the evidence, to preclude us from interfering with them.

And, although we have, also, concluded that no action will lie on such verbal promise, in favor of the plaintiff, against Joseph Naylor, and that the former cannot recover a personal judgment, against the latter, for the debt secured by such mortgage, merely by force of such promise, yet it does not follow that such fact, in connection with the other facts found, may not require us to hold, that the Howard mortgage, as between the plaintiff and Joseph Naylor, has been paid and extinguished.

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It may, on a given state of facts, be justly held, that such mortgage is extinguished, as between the plaintiff and Joseph Naylor; and that as between J. Naylor and any mortgagee subsequent to the plaintiff, J. Naylor has succeeded to, and yet retains all the rights of Howard, as first mortgagee. (Ballard v. Leach, 1 Williams, Vt. 491.)

On the facts, as found, it must be taken to be true, that the plaintiff forebore, to enforce his mortgage by selling the mortgaged property, from the 10th of February, 1855, relying upon the promise of J. Naylor to extinguish the prior encumbrance of the Howard mortgage, and to, also, pay the mortgage held by the plaintiff. Rent to Howard continued to accrue, at the rate of $2604.16, monthly, and to that extent, to depreciate the value of the plaintiff’s mortgage security. The mortgaged property was being daily much deteriorated in value, by J. Naylor’s use of it, and the value of its use, in the mean time, J. Naylor was permitted to realize and enjoy, in consequence of the reliance placed upon his promise to pay both mortgages.

Although it be true, that when one, who has become owner of the equity of redemption, subsequently pays off a mortgage upon the property, a court of equity will sometimes treat the incumbrance as being kept alive, and the person who has so paid it, as succeeding to the rights of such mortgagee, yet it will only do so when that course will uphold an innocent purpose of the person so paying, and be injurious to no one.

We are of the opinion, that the acts of J. Naylor, in procuring, the assignment of the Howard mortgage to Coe, and in subsequently selling the property, under the mortgage, and in purchasing it at such sale, amounted, in effect, as between him and the plaintiff, to an actual payment and extinguishment of that mortgage.

Howard was pressing for his money, and about to foreclose his mortgage; J. Naylor wished to effect some arrangement, by which Howard might be paid presently, while he, at the same time, could obtain further forbearance.

He found, in Mr. Coe, a friend, who would advance the money, on an assignment of the security held by Howard, and J. Naylor’s promise, to make good any deficiency. The advance by Coe was, . as between himself and J. Naylor, virtually, a loan to the latter.

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But Howard would not assign his mortgage to Coe, without the consent of the plaintiff was first obtained. And that was only obtained upon the reassurance, by J. Naylor, that he would pay the mortgage held by the plaintiff, less $1500; and the confidence he created, that he would obtain, presently, for the plaintiff, satisfactory security, that such payment should be made on the first of May thereafter.

Under such circumstances, we think it was properly found, that this transaction, as between the plaintiff and J. Naylor, amounted to an actual payment and satisfaction of the Howard mortgage. ' Assuming him to have been honest, and acting in good faith towards the plaintiff, in making the promises and giving the assurance, by which he procured the plaintiff’s forbearance and agreement, to deduct $1500 from his debt, and by which he also obtained the plaintiff’s consent to Howard’s assignment of his mortgage to Coe, we must regard these acts as done in the execution of the agreement between himself and the plaintiff, and not as having been done with a view to mislead and injure him.

The sale, under the mortgage, after it was assigned to Coe, may, without imputing any bad faith, be treated as a clear indication of an intent of J. Naylor to keep that incumbrance alive, as between himself and any subsequent mortgagees, as to whom he owed no duty to pay or extinguish it.

We conclude, therefore, that the rights óf J. Naylor are no stronger than if he had, without any assignment of the mortgage to Coe, paid it in full to Howard, and taken an assignment of if to himself.

If he had done the latter, then, as between himself and the plaintiff, such payment, under the facts and circumstances proved in this case, would have operated as a satisfaction of the mortgage, although, as between J. Naylor and mortgagees, subsequent to the plaintiff, it would not have that effect.

But unless it was held, as between J. Naylor and the plaintiff, to operate as an absolute payment and extinguishment of the mortgage, and if it should be treated in equity as a subsisting incumbrance, the result of keeping it alive would be, to defraud the plaintiff, and thereby enable J. Naylor to give effect to an unjust and dishonest purpose.

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We understand the rule to be, that, under such circumstances, it will be treated as paid and extinguished, when that course is required to best subserve the purposes of justice.

At all events, the purpose to be subserved must be an innocent purpose, and injurious to no one. (Ballard v. Leach, 1 Williams, 491 ; Starr v. Ellis, 6 J. Ch. R. 393.)

The mortgage to Howard having been, in fact, paid by J. Haylor, by the means before stated, and having thereby, as between him and the plaintiff, become actually extinguished, the plaintiff’s mortgage, thereupon, became a first lien upon the property ; and being a valid and legal lien, the mortgage subsequently executed to P. Haylor was subject to it, and the latter acquired no rights, except as a mortgagee, having a lien subsequent to that of the plaintiff.

The plaintiff’s debt, to the amount established by the judgment appealed from, and the costs included in such judgment, with his costs of the appeals, should be paid out of the proceeds of the property covered by the Howard mortgage, if they are sufficient for that purpose; and if not sufficient, any property covered by that mortgage, and not sold, being in the hands of either Joseph or Peter Haylor, should be applied to that object, so far as it may be necessary to effect full payment. Any proceeds or property included in the mortgage to P. Haylor, not required to satisfy the plaintiff’s debt and costs, as aforesaid, P. Haylor may rightfully retain.

Should the whole property and proceeds, properly applicable to that purpose, be insufficient to pay the plaintiff’s debt and costs in full, there can be no judgment against J. Haylor for the deficiency. The judgment must be modified, to conform to these views.

Ordered accordingly.

Cases cited